The Celsius Network is a financial technology (fintech) platform that offers interest-bearing savings accounts, borrowing, and payments with digital and fiat assets. It operates on an economic model that challenges conventional banking models while prioritizing the Celsius community.
Celsius Network Interest, Lending, and More
The Celsius Network is a blockchain-integrated fintech platform that’s accessible to anyone with a smartphone. With its suite of lending, yield creation , and payments solutions, the Celsius Network provides access to financial services and conditions not available through conventional institutions. At its core, the Celsius mandate is simple: ensure financial services while doing what’s best for the community, not intermediaries.
The Celsius Network’s community-first mandate flips the traditional approach taken in financial services, and allows for a radical alternative. Celsius returns 80% of all its earning to users in the form of rewards and attractive interest rates on savings. But how does Celsius afford to do this? The key lies in the over-collateralization of crypto loans and rehypothecation, a process by which crypto funds held as collateral on the Celsius Network are lent to another party — in this case, large investors looking for reliable inroads into cryptocurrency.
Rather than borrow crypto from disjointed sources, investors such as hedge funds can borrow crypto from a proven source: the Celsius Network. Celsius presents an attractive opportunity for large institutional investors looking for a secure onramp to the crypto market by aggregating cryptocurrency into one large pool. The interest Celsius earns from these investors is fed back into the community. 80% of profits are rewarded to Celsius Network users, while 20% is used to fund development on the platform. A closer look at each segment of the Celsius Network highlights a robust ecosystem of incentivized interactions.
Earn Interest: Stake Your Crypto
Celsius’s earning network allows users to stake their cryptocurrency for borrowing and earn interest in return. The platform accepts more than 35 tokens, including BTC, LTC, ETH, and stablecoins like USDT, GUSD, and DAI. The Annual Percentage Yield (APR) of each staked cryptocurrency reflects the market demand for that particular coin. As of October 2020, some of these tokens were earning 15% a year, dwarfing yield offers by banks — often less than 1%. If users opt to receive their interest earnings in CEL, the platform’s native token, payouts are 30% higher.
In contrast to fiat-denominated banks, Celsius doesn’t require a minimum deposit to start earning interest. Also, there’s no lockup period or penalty for failing to maintain a minimum or withdrawing your funds. With fewer restrictions and higher yields, the Celsius Network offers a radically different value proposition in the way you manage and hold your assets.
Borrow Cash: Crypto-Collateralized Loans
On the Celsius Network’s lending platform, you can borrow USD against crypto collateral. There are several benefits to taking out a crypto-collateralized loan. Perhaps most notably, these loans allow you to maintain your crypto assets while accessing fiat liquidity. Normally, if you sell your crypto in exchange for cash, there are tax implications in the form of capital gains and a risk of missing out on market appreciation. Celsius allows you to avoid this eventuality. Celsius Network loans are always over-collateralized to protect against losses that may arise from market volatility. As such, you can only obtain a loan that equates to 25%, 33%, or 50% of the collateral value.
The remaining untapped collateral acts as a buffer against crypto price fluctuations. To access Celsius Network loans, you need only select the type and amount of collateral you wish to deploy, the loan term, and the desired USD loan amount through the Celsius app. Compared to the conventional loan process that takes days or weeks, Celsius loans execute in minutes or seconds. Because all loans are collateralized, there’s no need to check credit or perform alternative verification protocols.
CEL Utility Token: Network Rewards
Launched in June 2018, the CEL token underpins the Celsius Network’s earning and reward systems. Initially, only 50% of the tokens were issued, with 25% going to the founding team and the remaining locked in a smart contract. According to project details, the locked tokens will enter circulation when CEL maintains a market value of $1.50 for longer than 10 days, and again when it exceeds $3 for 30 days.
Utilization of the CEL token affords each Celsius user group unique benefits:
Earners: By accepting rewards in the form of CEL tokens, earners receive up to 30% more rewards on all deposits of non-CEL tokens.
Borrowers: By paying interest with CEL tokens, borrowers receive up to a 30% discount on interest payments.
Institutions: By paying interest with CEL tokens, institutions borrowing tokens from Celsius receive a 30% discount on their interest payments.
The reward percentages originate from the Celsius loyalty program, which refers to each user’s CEL holdings. For instance, the Bronze reward level requires 5-10% of your portfolio to reside in CEL, Silver requires 10-15%, Gold requires 15-20%, and Platinum requires 20-100%. CEL’s most beneficial use is for earning compound interest, especially if you can maximize rewards through a substantial allocation of CEL in your portfolio.
CelPay: Crypto Payments to Anyone
Although Celsius does not offer a credit card, you can transfer assets via CelPay, a crypto payment app that allows you to send crypto to anyone — even to those without a wallet. When sending crypto, CelPay generates a shareable link, which automatically creates a CelPay wallet when the recipient clicks it. Unlike traditional remittance networks that charge a percentage fee on every transaction, Celsius transfers are free and compatible with all cryptocurrencies listed on the app.
Despite a building momentum behind decentralized finance, fintech companies like The Celsius Network are innovating in the space between centralization and decentralization. This middle ground is an inherent stepping stone to an entirely decentralized future and the benefits it can afford. Companies like Celsius successfully navigate this paradigm, providing a platform that incentivizes and streamlines financial services using a utility token (CEL) across network activities. As a growing number of people begin to explore the concept of unbanking themselves, fintech and DeFi will undoubtedly play essential and complementary gateways to the next generation of finance. The Celsius Network is a prime example of the value this interplay can unlock.
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